1.1 Scarcity, choice and opportunity cost Flashcards
What is the basic economic problem?
There are limited resources and unlimited wants which leads to the problem of scarcity.
What is a need?
Things that are required for human survival
What is a want?
Anything that someone desires, or would like to have
Why do people need to make choices?
Due to the economic problem
Who makes choices in an economy?
Individuals, firms and the government
What is the definition of opportunity cost?
The next best alternative foregone when an economic decision is made
What do we mean by resources?
FOP - land, labour, capital and enterprise
What are the 3 basic questions on resource allocation?
What are we going to produce?
How are we going to produce?
Who are we going to produce it for?
Who helps the most answering these three questions in most modern markets?
The government
As economists, what is the most basic problem we try to solve regarding resource allocation and scarcity?
How to allocate scarce resources, given unlimited wants
How does an economist know a choice made was good
If the value of our current choice is larger than the value of the opportunity cost than it was a good decision
What is the definition of scarcity in economics?
Scarcity refers to the limited availability of resources to meet unlimited wants.
Define ‘choice’ in the context of economics.
Choice refers to the decision made when selecting between alternatives due to scarcity.
True or False: All choices involve opportunity costs.
True
